Professional Documents
Culture Documents
Chapter
Part One
Introduction to
Corporate Finance
The business world experiences many events in the space of a year. However,
KEY NOTATIONS sometimes major events that shake the confidence of corporate managers,
regulators and investors come along to change the business environment
B Market value of debt
S Market value of equity
permanently. Arguably, 2007 and 2008 experienced one of these events with
V Value of the firm the global credit crisis that has affected banks, corporations and consumers
alike.
For many years, low inflation and buoyant economies led to a supply of
very cheap money in the world’s financial markets. China and India’s
economic growth, excessive consumption by individuals in the US and Europe, escalating property
prices, and highly competitive economic conditions contributed to a fairly unique business environ-
ment. However, in the summer of 2007, the world was stunned when news reports announced major
defaults in high-risk or subprime mortgages in the United States.
While the problem was confined largely to the US, the fallout from the mortgage defaults rippled
through all developed economies. US banks, worried about further losses in the subprime mortgage
market, reduced their credit facilities and lending to other banks. This led to a worldwide liquidity
crunch, and in the following months, bank after bank announced massive losses resulting from
worsening economic conditions.
The bad news was not just confined to the banking sector. In 2008, crude oil prices passed $100
a barrel and gold moved towards $1,000 an ounce, when just three years before they were valued at
$49 and $430 respectively. As inflationary pressures grew, raw material costs increased and corporate
profit margins eroded. To maintain their level of funding, many companies went to the Middle East
and Asia to raise more capital, and more frequently, investors from this region have become the main
investors.
Now, more than ever, corporate managers need to understand how to value investments accurately,
choose the best funding mix for their operations, manage the risk of their short- and long-term capital,
and satisfy the expectations of their investors. Understanding all of these issues and integrating them
into a cohesive picture is the goal of this text. Understanding corporate decision-making first requires
an understanding of what is meant by corporate finance and what a corporate entity looks like, all of
which we discuss in this chapter.
FIGURE
1.1 Net
working Current liabilities
Current assets capital
Non-current liabilities
Non-current assets
1. Tangible non-
current assets
2. Intangible non- Shareholders’ equity
current assets
The assets of the firm are on the left side of the balance sheet. These assets can be thought
of as short-term (current) and long-term (non-current). Non-current assets are those that will
last a long time, such as buildings. Some non-current assets are tangible, such as machinery
and equipment. Other non-current assets are intangible, such as patents and trademarks. The
other category of assets, current assets, comprises those that have short lives, such as inventory.
The tennis balls that your firm has made, but has not yet sold, are part of its inventory. Unless
you have overproduced, they will leave the firm shortly.
Before a company can invest in an asset, it must obtain financing, which means that it
must raise the money to pay for the investment. The forms of financing are represented on
the right side of the balance sheet. A firm will issue (sell) pieces of paper called debt (loan
agreements) or equity shares (share certificates). Just as assets are classified as long-lived or
short-lived, so too are liabilities. A short-term debt is called a current liability. Short-term debt
represents loans and other obligations that must be repaid within one year. Non-current liabilities
include debt that does not have to be repaid within one year. Shareholders’ equity represents
the difference between the value of the assets and the liabilities of the firm. In this sense, it
is a residual claim on the firm’s assets.
From the balance sheet model of the firm, it is easy to see why finance can be thought of
as the study of the following three questions:
1 In what long-lived assets should the firm invest? This question concerns the left side of
the balance sheet. Of course the types and proportions of assets the firm needs tend to be
set by the nature of the business. We use the term capital budgeting to describe the process
of making and managing expenditures on long-lived assets.
2 How can the firm raise cash for required capital expenditures? This question concerns the
right side of the balance sheet. The answer to this question involves the firm’s capital
structure, which represents the proportions of the firm’s financing from current and long-
term debt and equity.
3 How should short-term operating cash flows be managed? This question concerns the
upper portion of the balance sheet. There is often a mismatch between the timing of cash
inflows and cash outflows during operating activities. Furthermore, the amount and timing
of operating cash flows are not known with certainty. Financial managers must attempt
to manage the gaps in cash flow. From a balance sheet perspective, short-term manage-
ment of cash flow is associated with a firm’s net working capital. Net working capital is
defined as current assets minus current liabilities. From a financial perspective, short-term
cash flow problems come from the mismatching of cash inflows and outflows. This is the
subject of short-term finance.
On 4 March 2008, Admiral Group plc, a British motor insurer, announced its financial
EXAMPLE results for the year 2007. Insurance companies earn income from receiving insurance
1.1 premiums and investing this money in the financial markets. They pay out on insurance
claims that they receive throughout the year. The assets of an insurance company are
generally financial securities that they can sell at any time, and the liabilities are generally
insurance claims that will be paid out within a year. The figures, which come from the firm’s financial
accounts, are simplified to make the example more accessible.
At the end of 2007, the company had £7.7 million in tangible non-current assets and £69.0 million
in intangible non-current assets. Current assets amounted to £793.6 million and current liabilities
(liabilities due within one year) were £632.7 million. Admiral Group had no non-current liabilities.
A balance sheet model for Admiral Group plc is presented below.
Capital Structure
Financing arrangements determine how the value of the firm is sliced up. The people or
institutions that buy debt from (i.e. lend money to) the firm are called creditors, bondholders
or debtholders. The holders of equity shares are called shareholders.
Sometimes it is useful to think of the firm as a pie. Initially the size of the pie will depend
on how well the firm has made its investment decisions. After a firm has made its investment
decisions, it determines the value of its assets (e.g. its buildings, land, and inventories).
The firm can then determine its capital structure. The firm might initially have raised the
cash to invest in its assets by issuing more debt than equity; now it can consider changing
that mix by issuing more equity and using the proceeds to buy back (pay off) some of its debt.
Financing decisions like this can be made independently of the original investment decisions.
The decisions to issue debt and equity affect how the pie is sliced.
The pie we are thinking of is depicted in Fig. 1.2. The size of the pie is the value of the
firm in the financial markets. We can write the value of the firm, V, as
V=B+S
where B is the market value of the debt and S is the market value of the equity. The pie
diagrams consider two ways of slicing the pie: 50 per cent debt and 50 per cent equity, and
25 per cent debt and 75 per cent equity. The way the pie is sliced could affect its value. If so,
the goal of the financial manager will be to choose the ratio of debt to equity that makes the
value of the pie – that is, the value of the firm, V – as large as it can be.
FIGURE
25% debt
1.2
50% debt 50% equity 75% equity
In response to the $4.9 billion loss made from trading in the financial markets at
EXAMPLE the beginning of 2008, the French bank Société Générale announced that it would
1.2 issue $5.5 billion of new shares to recover its funding levels. Société Générale could
also have issued new debt securities for the same amount of money. If the funding
ratio of debt to equity does not affect the value of the firm, the managers of Société
Générale would have been indifferent between the two funding options, since the money raised would
have been the same.
Company: FM GmbH
Location: Frankfurt, Germany
The Chief Financial Officer will be responsible for the internal and external financial and
accounting reporting requirements of the company. This position requires an individual whose
business acumen, financial aptitude and professional initiative enable them to improve the
organization’s performance and enhance the effectiveness of the individuals within. The CFO
will need to be committed to results and have a strong sense of personal responsibility for
how the company performs. Financial aptitude and analytical skills need to translate into
insightful corrective actions and proactive business improvement. FM is of a size where the
CFO will need to blend both strategic and tactical skills. The candidate will need to maintain
a ‘big picture’ perspective but also have a strong attention to detail.
Primary responsibilities:
• Oversee financial management of corporate operations, to include developing financial and
budget policies and procedures.
• Responsible for cash management, banking relationships and debt management, as well as
heavy involvement in any merger and acquisition activities.
• Create, co-ordinate, and evaluate the financial programmes and supporting information systems
of the company to include budgeting, tax planning, property, and conservation of assets.
• Ensure compliance with local and international budgetary reporting requirements.
• Oversee the approval and processing of revenue, expenditure, and position control
documents, department budgets, mass salary updates, ledger, and account maintenance.
• Co-ordinate the preparation of financial statements, financial reports, special analyses and
information reports.
• Manage an accounting department including a controller and accounting staff.
• Implement finance, accounting, billing and auditing procedures.
• Establish and maintain appropriate internal control safeguards.
• Interact with other managers to provide consultative support to planning initiatives through
financial and management information analyses, reports and recommendations.
• Ensure records systems are maintained in accordance with internationally accepted auditing
standards.
• Strategic thinker who has the ability to manage with an operational perspective.
• Approve and co-ordinate changes and improvements in automated financial and
management information systems for the company.
• Analyse cash flow, cost controls and expenses to guide business leaders. Analyse financial
statements to pinpoint potential weak areas.
• Establish and implement short- and long-range departmental goals, objectives, policies and
operating procedures.
• Serve on planning and policy-making committees.
The interplay of the firm’s activities with the financial markets is illustrated in Fig. 1.3.
The arrows in Fig. 1.3 trace cash flow from the firm to the financial markets and back again.
Suppose we begin with the firm’s financing activities. To raise money, the firm sells debt
(bonds) and equity (shares) to investors in the financial markets. This results in cash flows
from the financial markets to the firm (A). This cash is invested in the investment activities
(assets) of the firm (B) by the firm’s management. The cash generated by the firm (C) is paid
to shareholders and bondholders (F). The shareholders receive cash in the form of dividends;
the bondholders who lent funds to the firm receive interest and, when the initial loan is
repaid, principal. Not all of the firm’s cash is paid out. Some is retained (E), and some is paid
to the government as taxes (D).
Over time, if the cash paid to shareholders and bondholders (F) is greater than the cash
raised in the financial markets (A), value will be created.
FIGURE
Figure 1.3 Cash flows between the firm and the financial markets
Identification of cash flows Unfortunately, it is not easy to observe cash flows directly.
Much of the information we obtain is in the form of accounting statements, and much of the
work of financial analysis is to extract cash flow information from accounting statements. The
following example illustrates how this is done.
EXAMPLE
Accounting Profit versus Cash Flows
1.3 Midland plc is an Irish firm that refines and trades gold. At the end of the year, it sold
2,500 ounces of gold for $1.67 million. The company had acquired the gold for $1 million
at the beginning of the year. The company paid cash for the gold when it was purchased.
Unfortunately it has yet to collect from the customer to whom the gold was sold. The following is a
standard accounting of Midland’s financial circumstances at year-end:
The Midland plc Accounting view Income statement Year ended 31 December
Sales ¤1,670,000
−Costs −¤1,000,000
Profit ¤ 670,000
Under International Financial Reporting Standards (IFRS), the sale is recorded even though the customer
has yet to pay. It is assumed that the customer will pay soon. From the accounting perspective, Midland
seems to be profitable. However, the perspective of corporate finance is different. It focuses on cash
flows:
The Midland plc Financial view Income statement Year ended 31 December
Cash inflow ¤ 0
Cash outflow −¤1,000,000
−¤1,000,000
The perspective of corporate finance is interested in whether cash flows are being created by the gold
trading operations of Midland. Value creation depends on cash flows. For Midland, value creation
depends on whether and when it actually receives $1.67 million.
Timing of Cash Flows The value of an investment made by a firm depends on the timing of cash
flows. One of the most important principles of finance is that individuals prefer to receive cash flows
earlier rather than later. One euro received today is worth more than one euro received next year.
EXAMPLE
Cash Flow Timing
1.4 The Italian firm Montana SpA is attempting to choose between two proposals for new
products. Both proposals will provide additional cash flows over a four-year period and
will initially cost $10,000. The cash flows from the proposals are as follows:
At first it appears that new product A would be best. However, the cash flows from proposal B come
earlier than those of A. Without more information, we cannot decide which set of cash flows would
create the most value for the bondholders and shareholders. It depends on whether the value of getting
cash from B up front outweighs the extra total cash from A. Bond and share prices reflect this prefer-
ence for earlier cash, and we shall see how to use them to decide between A and B.
Risk of Cash Flows The firm must consider risk. The amount and timing of cash flows are not
usually known with certainty. Most investors have an aversion to risk.
EXAMPLE
Risk
1.5 The Norwegian firm Fjell ASA is considering expanding operations overseas, and it is
evaluating the Netherlands and South Africa as possible sites. The Netherlands is considered
to be relatively safe, whereas operating in South Africa is seen as considerably more risky.
In both cases the company would close down operations after one year.
After undertaking a complete financial analysis, Fjell has come up with the following cash flows of
the alternative plans for expansion under three scenarios – pessimistic, most likely, and optimistic:
If we ignore the pessimistic scenario, perhaps South Africa is the better alternative. When we take the
pessimistic scenario into account, the choice is unclear. South Africa appears to be riskier, but it also
offers a higher expected level of cash flow. What is risk, and how can it be defined? We must try to
answer this important question. Corporate finance cannot avoid coping with risky alternatives, and
much of our book is devoted to developing methods for evaluating risky opportunities.
Possible Goals
If we were to consider possible financial goals, we might come up with some ideas like the following:
• Survive.
• Avoid financial distress and bankruptcy.
• Beat the competition.
• Maximize sales or market share.
• Minimize costs.
• Maximize profits.
• Maintain steady earnings growth.
These are only a few of the goals we could list. Furthermore, each of these possibilities, as a
goal for the financial manager, presents problems.
For example, it’s easy to increase market share or unit sales: all we have to do is lower our
prices or relax our credit terms. Similarly, we can always cut costs, simply by doing away with
things such as research and development. We can avoid bankruptcy by never borrowing any
money or never taking any risks, and so on. It’s not clear that any of these actions are in the
shareholders’ best interests.
Profit maximization would probably be the most commonly cited goal, but even this is not
a precise objective. Do we mean profits this year? If so, then we should note that actions such
as deferring maintenance, letting inventories run down, and taking other short-run cost-cutting
measures will tend to increase profits now, but these activities aren’t necessarily desirable.
The goal of maximizing profits may refer to some sort of ‘long-run’ or ‘average’ profits,
but it’s still unclear exactly what this means. First, do we mean something like accounting
net income or earnings per share? As we shall see in more detail in Chapter 4, these accounting
numbers may have little to do with what is good or bad for the firm. Second, what do we
mean by the long run? As a famous economist once remarked, in the long run we’re all dead!
More to the point, this goal doesn’t tell us what the appropriate trade-off is between current
and future profits.
The goals we’ve listed here are all different, but they tend to fall into two classes. The first
of these relates to profitability. The goals involving sales, market share and cost control all
relate, at least potentially, to different ways of earning or increasing profits. The goals in the
second group, involving bankruptcy avoidance, stability and safety, relate in some way to
controlling risk. Unfortunately, these two types of goal are somewhat contradictory. The pursuit
of profit normally involves some element of risk, so it isn’t really possible to maximize both
safety and profit. What we need, therefore, is a goal that encompasses both factors.
The goal of financial management is to maximize the share price of the company.
The goal of maximizing the share price avoids the problems associated with the different goals
we listed earlier. There is no ambiguity in the criterion, and there is no short-run versus long-run
issue. We explicitly mean that our goal is to maximize the current share value.
If this goal seems a little strong or one-dimensional to you, keep in mind that the share-
holders in a firm are residual owners. By this we mean that they are entitled only to what is
left after employees, suppliers and creditors (and everyone else with legitimate claims) are paid
their due. If any of these groups go unpaid, the shareholders get nothing. So if the shareholders
are winning in the sense that the leftover, residual portion is growing, it must be true that
everyone else is winning also.
Because the goal of financial management is to maximize the value of the equity, we need
to learn how to identify investments and financing arrangements that favourably impact on
the value of the shares. This is precisely what we shall be studying. In fact, we could have
defined corporate finance as the study of the relationship between business decisions and the
value of the shares in the business.
FIGURE
Dealer market Agency market
1.4
Trader A Trader A
Trader B Trader B
Figure 1.4 illustrates the major difference between dealer and agency markets. In both cases,
Trader A wishes to sell to Trader B. Moreover, in each scenario, Trader A sells shares for £100
and Trader B buys shares for £110. So what is the difference between the market types? In the
dealer market, the dealer bears the risk of holding the shares before he can find a counterparty
to buy them. In Fig. 1.4, the dealer finds someone to buy the shares at £110. However, if they
are unable to locate a counterparty, they may end up with shares that are less than the value
at which they were purchased (£100). This is known as inventory risk, and constitutes a cost
to the dealer. The difference between the dealer’s buying and selling price is known as the
bid-ask spread, which in this case is £10.
In an agency market, Trader A hires an agent or broker to find a counterparty. The broker
will hopefully find someone and then take a commission on the sale price, which in this case
is £10. At no time does the broker own the shares that she is trying to sell and, as a result,
does not bear inventory risk.
At the core of the money markets are the money market banks (these tend to be large
banks located in Frankfurt, London and New York), government securities dealers (some of
which are the large banks), and many money brokers. Money brokers specialize in finding
short-term money for borrowers and placing money for lenders. The financial markets can be
classified further as the primary market and the secondary markets.
Secondary Markets
A secondary market transaction involves one owner or creditor selling to another. Therefore
the secondary markets provide the means for transferring ownership of corporate securities.
Although a corporation is directly involved only in a primary market transaction (when it
sells securities to raise cash), the secondary markets are still critical to large corporations. The
reason for this is that investors are much more willing to purchase securities in a primary
market transaction when they know that those securities can later be resold if desired.
Dealer versus Auction Markets There are two kinds of secondary markets: dealer markets
and auction markets. Generally speaking, dealers buy and sell for themselves, at their own risk.
A car dealer, for example, buys and sells automobiles. In contrast, brokers and agents match
buyers and sellers, but they do not actually own the commodity that is bought or sold. An
estate agent, for example, does not normally buy and sell houses.
Dealer markets in equities and long-term debt are called over-the-counter (OTC) markets.
Most trading in debt securities takes place over the counter. The expression over the counter
refers to days of old, when securities were literally bought and sold at counters in offices
TA B L E
around the country. Today a significant fraction of the market for equities and almost all of
the market for long-term debt has no central location; the many dealers are connected
electronically.
Auction markets differ from dealer markets in two ways. First, an auction market or exchange
has a physical location (such as Wall Street in New York). Second, in a dealer market, most of
the buying and selling is done by the dealer. The primary purpose of an auction market, on
the other hand, is to match those who wish to sell with those who wish to buy. Dealers play
a limited role.
Trading in Corporate Securities The equity shares of most large firms trade in organized
auction markets. The largest such market is the New York Stock Exchange (NYSE). Other auction
exchanges include Euronext (Amsterdam, Brussels, Paris, and Lisbon Stock Exchanges) and
London Stock Exchange (largest securities only).
In addition to the stock exchanges, there is a large OTC market for equities. The National
Association of Securities Dealers Automated Quotation System (NASDAQ) in the US and most
equity securities traded on the London Stock Exchange are both examples of OTC markets.
The fact that OTC markets have no physical location means that national borders do not
present a great barrier, and there is now a huge international OTC debt market. Because of
globalization, financial markets have reached the point where trading in many investments
never stops; it just travels around the world.
Listing
Shares that trade on an organized exchange are said to be listed on that exchange. To be listed,
firms must meet certain minimum criteria concerning, for example, asset size and number of
shareholders. These criteria differ from one exchange to another. For example, Euronext has
three main requirements for listing. First, a company must have at least 25 per cent of its
shares listed on the exchange, and the value of these shares must be at least $5 million. Unlike
other exchanges, Euronext does not have a minimum threshold for asset size. The second
requirement is that the listing firm have at least three years of financial accounts filed
with the regulator. Finally, all of the company’s financial statements must follow recognized
international financial reporting standards, also known as IFRS.
Table 1.2 gives the market value of stock exchanges around the world as at the beginning
of 2008.
Early Days
The foundation of any new business is the product or service idea. Through their research, Brin
and Page believed they had a more efficient model of searching through Internet pages than
the search engines that existed in 1996. Armed only with this idea and a few working algorithms,
they approached several potential investors, and successfully attracted $100,000 from one of
the founders of Sun Microsystems to develop their business concept. Within a year they had
received a further $25 million from venture capitalists. To receive this financing, Brin and Page
would have had to create a business plan and cash flow forecast that estimated their future costs
and revenues. From business plans and cash flows, investors are able to arrive at a valuation of
the future company. Valuation of companies and projects is covered in Part Two of this text.
TA B L E
also known as its capital structure. It may even choose to use more complex instruments such
as options or warrants. Capital structure is covered in Part Four of this textbook, and complex
funding securities are discussed in detail in Part Six.
The Google share issue was highly unusual in that it was organized wholly over the Internet.
However, several fundamental issues had to be decided upon. First, what should the value of
the new shares be? Should A class shares have a different value from B class shares? How risky
were the shares? These questions are of huge importance to investors who are planning to
invest their cash in any new investment. Assessing the risk of investments is covered in Part
Three, and the process of issuing new securities is reviewed in Part Five.
Google as a Business
Although Google is known as an Internet firm, its success and size make it quite similar to
other large firms in more capital-intensive industries. As at the end of 2007 Google had over
$4 billion invested in property, and nearly 17,000 employees. In fact, the Google management
were so concerned that the firm was losing a lot of its early values and culture that they
appointed a chief cultural officer, whose remit was to develop and maintain the early Google
working environment. Like all other firms, Google needs to ensure that it has enough liquidity
and cash available to pay off its creditors. Short-term financial planning is therefore crucial
to its continued existence. This is covered in Part Seven of the text.
Finally, Google has undertaken over 30 acquisitions since 2001. Most notably, it bought
YouTube ($1.65 billion) in 2006 and DoubleClick ($3.1 billion) in 2007. Its operations span
many countries, making its global reach enormous. It is one of the biggest companies in the
world, and will continue to evolve and develop in the future. The final part of this textbook
deals with issues such as corporate restructuring, financial distress, and international finance.
These are extremely important to all companies, and not just Google.
16 Financial Management Goals You have been manager of a small company for 20 years
and have become great friends with your employees. In the last month, new Norwegian
owners have bought out the company’s founding owner and have told you that they need
to cut costs in order to maximize the value of the company. One of the things they suggest
is to lay off 40 per cent of the workforce. However, you believe that the workforce is the
company’s greatest asset. On what basis do you argue against the new owners’ opinions?
17 Goals of the Firm Your company’s new owners suggest the following changes to maximize
the value of the firm. Write a brief report responding to each point in turn:
(a) Add a cost of living adjustment to the pensions of your retired employees.
(b) It is expected that high oil prices will increase your revenues by 25 per cent. The
company wishes to increase its exploration costs by 15 per cent and pay the rest of the
profit out to shareholders (i.e. themselves) in the form of increased cash dividends.
(c) Begin new research and development into more advanced but untried exploration
techniques.
(d) Lay off 15 per cent of the workforce to keep costs down.
18 Dealer versus Agency Markets Explain the difference between dealer and agency markets.
Why do you think both types of market exist? Is there one type of market that is the best?
Explain.
19 Balance Sheet If a firm is to cut costs as a result of falling revenues, how would this
appear in the balance sheet? Explain.
20 Dual Class Shares Your grandmother asks you why Google has two classes of shares.
Explain to her, in a way she would understand and not put her to sleep, why Google
structured its share issue in such a way.
21 Balance Sheet Equation You have the following information for the British mining
CHALLENGE firm Antofagasta plc. All figures are in $ millions.
Give a brief interpretation of what you think Antofagasta plc did over the period
2003–2007. Do you think it is in a better position now than in 2003?
22 Balance Sheet Assume that Antofagasta plc increased its non-current assets by $1,000
million in 2008 and at the same time reduced its current assets by $500 million. Review
the ways in which Antofagasta would be able to finance this expansion.
23 Balance Sheet Assume that, in 2009, Antofagasta purchased a new mine for $500 million.
It paid this on credit, and won’t be due to actually pay for the mine until 2011. The
managers of Antofagasta state that, in the future, any increase in assets will be wholly
funded by debt. What would the balance sheet look like at the end of 2009? At the end
of 2011?
24 Balance Sheet Assume that instead of financing the expansion fully with debt, the
managers of Antofagasta say they wish to maintain the ratio of non-current liabilities to
equity after the expansion. What would Antofagasta’s balance sheet look like at the end
of 2011?
25 Financial Market Regulators The UK’s Financial Services Authority states that its objec-
tives are to promote efficient, orderly, and fair markets, help retail consumers achieve a
fair deal, and improve the country’s business capacity and effectiveness. The German
financial markets regulator, BaFin, states that ‘The objective of securities supervision is
to ensure the transparency and integrity of the financial market and the protection of
investors.’ Are the British and German objectives consistent with each other? Explain.
Additional Reading
The field of corporate finance is enormous, and evolves in conjunction with events in the
global business environment. An interesting paper for readers who wish to delve further is
given below. Admittedly, the paper was written in 2000, but the discussion is still highly
relevant today. Furthermore, as you will discover in later chapters, corporate finance research
has progressed a lot in the 10 years since the paper was published.
Zingales, L. (2000) ‘In search of new foundations’, Journal of Finance, vol. 55, no. 4,
pp. 1623–1653.
To help you grasp the key concepts of this chapter check out
the extra resources posted on the Online Learning Centre at
www.mcgraw-hill.co.uk/textbooks/hillier